The MSME 45-day payment rule: how tender payments work

The rule itself is short: if you’re a registered micro or small enterprise, the MSMED Act says the buyer must pay you within the agreed period, and that period can never exceed 45 days from acceptance of your goods or services. Cross it, and the buyer owes you compound interest by operation of law.

Winning the tender felt like the hard part. Then you delivered, and the money didn’t arrive. Weeks pass, your ePBG is still locked up, your working capital is sitting in someone else’s office, and you’re calling a procurement desk that doesn’t call back. This is the stage nobody warns you about — and if you’re a registered micro or small enterprise, it’s also where the law is squarely on your side, if you know how to use it.

Let me walk through what actually happens between delivery and money in the bank, where it gets stuck, and the one rule every small supplier should have memorised.

Delivery is not payment: the sequence that follows

There’s a defined sequence after you deliver, and on GeM it’s fairly explicit. Knowing each step before you’re standing in it helps. (If you’re new to how GeM orders flow end to end, I covered it in the GeM bidding process.)

Inspection and acceptance

First, the buyer (or a consignee acting for them) checks that what you supplied matches the contract — quantity, specification, quality, timeline. On GeM this shows up as a consignee receipt and an acceptance window.

If they accept, the clock starts. If they reject, you’re into correction or dispute, and nothing moves until that’s resolved.

There’s usually a deemed acceptance rule too. Under the MSMED Act, if the buyer doesn’t object in writing within 15 days of delivery, the goods or services count as accepted. GeM’s own terms give the consignee 10 days to accept or reject, unless the bid says otherwise. Know the window on your contract, because deemed acceptance is often what protects you when a buyer goes silent.

The invoice

On GeM you generate the invoice against the order, the consignee receipt, and the acceptance. The platform ties these together, which works in your favour — a clean acceptance record is your evidence later if payment runs late.

Payment processing

The buyer raises the payment internally, it goes through their accounts and treasury, and eventually it credits to you. GeM has its own payment tracking and an online grievance route. Its terms say payment for goods is due within 10 days of the consignee’s receipt-cum-acceptance certificate (CRAC), unless the bid says otherwise.

The system is better than the old offline world. It’s not magic. Government accounting cycles, budget heads, and end-of-financial-year crunch all still apply.

Your ePBG comes back later than your payment

The performance guarantee doesn’t come back the moment you deliver. The ePBG covers the full performance period, which often includes a warranty or defect-liability tail after delivery. So the typical sequence is: you deliver, the buyer accepts, the contract runs out its performance and warranty window, and only then is the ePBG released and your bank limit freed.

I covered what EMD and ePBG are in EMD, ePBG, MII and MSE, so I won’t repeat the basics. The point for cash flow is this: ePBG release is a separate event from payment, and it’s often later. You can be paid in full and still have a guarantee tying up your banking limit for months. Track both as two distinct things to chase — nobody at the buyer’s end will chase either one for you. (Getting your EMD back after a lost bid is its own process too; I wrote up how EMD refunds work separately.)

The MSME 45 day payment rule

Here’s the part to memorise. If you’re a registered micro or small enterprise, the MSMED Act gives you a statutory payment timeline, and it isn’t a suggestion.

What the rule actually says

Where there’s an agreement in writing, the buyer must pay you by the agreed date. Where no period is agreed, payment is due within 15 days of acceptance or deemed acceptance. And in no case can the agreed period exceed 45 days from the day of acceptance or deemed acceptance.

So the agreed date can be 30 days. It can be 45. It cannot be 60. The 45 days is a hard ceiling, not a default.

What crossing the limit costs the buyer

If the buyer crosses that limit, the consequence is real money. The Act makes them liable to pay compound interest, with monthly rests, on the outstanding amount, at three times the bank rate notified by the RBI. This interest accrues by operation of law — you don’t have to have negotiated it into your contract, and a clause trying to waive it doesn’t hold.

Two conditions decide whether you’re covered

First, you must be registered as a micro or small enterprise on Udyam. The protection attaches to your status as a supplier, so the registration has to be in order — and the right classification matters here just as it does for eligibility, which I wrote about in the revised MSME classification. Medium enterprises aren’t covered by this rule.

Two cautions here. Retail and wholesale traders can register on Udyam, but only for priority-sector lending, so this protection doesn’t extend to them. And register before you take the order: courts have been divided on whether a supplier who registers after the contract can claim the Act’s protection for it.

Second, the clock runs from acceptance, not from your invoice. This is why a clean GeM acceptance record is so valuable. It fixes the date the 45 days runs from.

Section 43B(h): the tax angle that actually makes buyers pay

For years the 45-day rule existed and plenty of buyers ignored it, because chasing interest through the facilitation council is slow. Then the income-tax law added teeth, and this lever is much harder for a tax-paying buyer to ignore.

Under Section 43B(h) of the Income Tax Act, an amount a buyer owes a micro or small enterprise is deductible only in the year it is actually paid, if the buyer pays later than the MSMED Act limit. Pay on time and the buyer deducts it as usual. Pay late across 31 March, and the deduction moves to the year the money actually goes out. Their taxable profit goes up. Their tax bill goes up.

From 1 April 2026, the same rule continues as section 37(2)(g) of the new Income-tax Act, 2025.

That’s a far sharper incentive than interest you might or might not pursue. It means a buyer’s own accountant now has a reason to push MSE payments out on time before the financial year closes. Being registered isn’t just a tender benefit anymore; it changes how seriously a buyer treats your invoice. (43B(h) bites on the buyer’s side for amounts owed to micro and small suppliers — one more reason your Udyam registration must be current and correctly classified.)

The tax lever only moves buyers who pay income tax, such as companies and PSUs. Government ministries and departments don’t pay it, so with them your levers are the interest and Samadhaan.

MSME Samadhaan: where you complain, and why filing works

If a buyer still pays late, you’re not stuck writing emails into a void. The government runs a portal called MSME Samadhaan specifically for delayed-payment complaints from micro and small enterprises.

You file your case online with the order, invoice, and acceptance details. It goes to your state’s Micro and Small Enterprise Facilitation Council, which can take up conciliation and then arbitration on the delayed payment and the interest due. Filing also puts a visible, on-record complaint against the buyer, which by itself sometimes shakes the payment loose.

It’s not instant and it’s not effortless. But it’s a real statutory channel, and using it is a normal business act, not a nuclear option.

Habits that keep your cash flow alive in the gap

The law is on your side. Your cash flow still has to survive the gap between delivery and money, because even a fast government payment is rarely same-week. A few habits that keep small suppliers solvent:

• Price the payment cycle into the bid. If this buyer or this category typically pays slowly, that delay is a cost of capital — build it into your number before you decide your floor, the same discipline I argued for in L1 bidding.
• Get acceptance recorded cleanly and promptly. Acceptance starts the 45-day clock and the interest clock. Chase the consignee receipt as hard as you chase the payment.
• Track payment and ePBG release as two separate tasks, with dates on both. Diarise the 45-day mark from acceptance for every MSE order.
• Don’t stack all your capital into one slow-paying contract. A single delayed payment should never stop you bidding on the next, better tender.
• Keep Udyam current. Every protection above — the 45-day rule, the interest, 43B(h), Samadhaan — hangs on your registration being valid and correctly classified.

The suppliers who last aren’t the ones who win the most. They’re the ones who get paid, free up their guarantees, and keep capital moving. The rules to make that happen exist. Most small businesses just never learned them — now you have.